Devaluing Naira, huge mistake says expert

Chairman and Chief Executive Officer, CEO, Safe water Energy and Environmental Restoration, SWEER Global, Dr. Thaddeaus Thompson, Sunday, said the Federal Government’s decision to devalue the Naira was a huge mistake.

Thompson made the assertion in a chat with newsmen while expressing concern over the unabated inflation trend that has brought the economy to its lowest ebb as businesses at all levels suffocate and struggle to survive as there is a mass exodus of corporate organisations from Nigeria to other African countries.

He said: “It is true that devaluing a country’s currency helps reduce imports and monies owed by the country to foreign trade partners. It also minimises direct borrowing and curtails unnecessary spending on foreign goods.

“Those who thought devaluing the Naira will increase purchases from Nigeria made a huge mistake because this works only if the country has a high supply tendency or high demand for its goods abroad. It works well for China to devalue its currency because it’s the world’s leading producer of tangible goods.

“China is a high supply nation. Nigeria does not have the same tendency as China, therefore, devaluing its currency will benefit countries buying from Nigeria and not the Nigerian economy.

“While the government’s scheme of undervaluing the Naira will indeed increase the volume of sales made in Nigeria, this scheme results in the nation, on the net, transferring economic value to the country’s trading partners rather than the nation getting net economic value from those trading partners.

“So, the traders gain because the undervalued Naira subsidizes their consumption. Further, because the nation does make more sales, also reaping benefits are the people paid to work at the production facilities, as well as the stockholders who supply the goods sold in the country, which in today’s circumstance is the foreign countries, such as China, US, Germany, Britain, and Brazil (Nigeria’s main trading partners). But without question, the nation itself is made poorer.”

“If, for example, Nigeria successfully arranges for foreign traders to purchase Nigerian Naira at below-market prices, Nigerian exports to foreign countries will indeed rise, and foreign exports to Nigeria will fall.

“Nigerian exports to foreign countries have not risen to substantiate any claims of success. And even if there is anything visible to be proud of as export gains, which I doubt exist, the Nigerian people as a whole have become poorer by an undervalued Naira.

He also asserted that “Also, despite visible losses of some foreign firms, the foreign traders as a whole will be made richer by an undervalued Naira. After all, foreign buyers – final consumers as well as foreign firms that use Nigerian imports as inputs in production – are the lucky recipients of the additional resources that Nigeria’s currency policy extracts from the impoverished Nigerian populace.